The new governor of the Bank of Thailand wants to get more involved with the country’s structural challenges and real sector issues, expanding the bank’s role beyond its traditional focus on economic stability.
Given the slower growth of the Thai economy and persistent structural problems, particularly declining productivity and competitiveness as well as high household debt, the central bank plans to take a more hands-on approach in addressing these challenges to support Thais and local businesses, governor Vitai Ratanakorn said at a seminar hosted by the Bank of Thailand’s Northeastern Office on Friday.
Mr Vitai, who assumed office on Oct 1 for a five-year term, said he would cooperate with all relevant stakeholders and engage more closely with economic problems to help address the country’s structural weaknesses.
The central bank’s core mandate traditionally covers three pillars: inflation, economic growth and financial stability.
While inflation is slightly below the regulator’s target range due to pressure from fuel and food prices, it is expected to return to the target in the medium term.
The financial system remains relatively strong, leaving no significant concerns in these two areas, he said.
“However, the slowdown in Thailand’s economy and its structural issues require collaboration from all parties to support recovery. The central bank wants to take on a more prominent role in revitalising the economy and supporting Thai people and businesses,” Mr Vitai said.
New SME loan scheme
He said the central bank plans to introduce a new loan scheme for small and medium-sized enterprises (SMEs) using a loan guarantee mechanism. Scheduled for early 2026, the programme aims to expand SME lending by about 100 billion baht, or roughly 5% of the sector’s existing loan portfolio.
With slow economic growth, weak domestic demand, subdued investment and rising credit risks, bank loan growth has contracted for 15 consecutive months, said Mr Vitai.
Total outstanding loans in the banking sector fell by 1% year-on-year in the third quarter, marking the fifth straight quarter of decline, according to the regulator.
The SME segment recorded the sharpest decline, with loans contracting by 4% in the third quarter, worsening from a 3% drop in the previous quarter.
Economic headwinds and structural problems such as slower long-term growth, weaker competitiveness and productivity, an ageing population and high household debt continue to weigh on lending, especially to SMEs.
“Higher credit risk amid slow economic growth is a major factor dampening SME loan expansion. Targeted measures to support this segment are therefore essential,” Mr Vitai said.
The central bank collaborated with the Finance Ministry, Thai Bankers’ Association, asset management companies (AMCs) and other stakeholders to recently launch a new debt resolution programme using AMCs.
The initiative targets small non-performing loan (NPL) borrowers with total debt of less than 100,000 baht per person, taking effect on Jan 1 next year.
Isan income
Amidst the broader economic slowdown, the northeastern region faces particular challenges, with household incomes significantly lower than in other regions.
During 2017-2023, average annual income in the Northeast grew by just 0.6%, while household expenses increased by 2%.
Income per person in the Northeast remained lower than in other regions, while the uptick in expenses was linked to the region’s growing household debt burden.
Over the same period, Thailand’s total household debt rose by 24%, whereas household debt in the Northeast surged by 55%.
Although the region accounts for one-third of the country’s population, it contributes only 10% of national GDP.
In addition, Mr Vitai said farmers make up about half of the workforce in the Northeast. However, falling agricultural prices have weakened household incomes and exacerbated debt pressures.
The government’s new debt resolution scheme is expected to offer partial relief to NPL borrowers and indebted households in the Northeast.
The central bank expects some borrowers to exit the NPL cycle and return to performing-loan status under the programme, he said.